Jobless rate hits 18-month high of 3.9 per cent

A bumper month of jobs growth in November was more than offset by a swelling labour force, as unemployment ticked up from 3.8 per cent in October.

Employment growth cannot keep up with rapid growth in population.

The unemployment rate has ticked up to an 18-month high of 3.9 per cent, as a bumper month of jobs growth in November was more than offset by a growing ­labour force.

The number of employed Australians lifted by a surprisingly strong 61,500, with 57,000 of that employment being full-time, the latest Australian Bureau of Statistics figures reveal.

The key jobless measure had been tracking in the mid-3s for about a year, but now appears to be pushing higher – albeit with the rise driven more by strong immigration growth easing labour market pressures, rather than employers sacking workers.

The surge in net migration is leading to the population expanding by 50,000 a month, according to Capital Economics, and ABS head of labour statistics Bjorn Jarvis said “we have continued to see employment growth keeping pace with high population growth through 2023”.

The government’s mid-year budget update on Wednesday predicted unemployment would continue to climb, but remain contained at 4.25 per cent by mid-2024 – echoing the Reserve Bank’s hopes that Australia will navigate the inflation challenge without a deep downturn or steep rise in joblessness.

Underemployment – which measures the share of workers who are trying to get more hours but are unable to – inched up to 6.5 per cent, according to the ABS’s seasonally adjusted figures, higher than a year earlier but still well down on pre-pandemic levels of over 8 per cent.

Treasurer Jim Chalmers said the jobs figures showed the economy was in good shape, despite the unemployment rate rising.

“In the context of a slowing economy and global uncertainty, unemployment with a three in front of it is a really remarkable outcome, even as we recognise that unemployment will tick up over time as the inevitable consequence of higher interest rates,” Dr Chalmers said.

“It does mean that as 2023 gives way to 2024 that there is a lot of resilience and a lot of strength in our labour market, even as it begins to soften around the edges as a consequence of the conditions that we confront together.”

Evidence of that softening was in a further 0.4-point lift in the youth unemployment rate to a two-year high of 9.6 per cent, after reaching a low of 7.2 per cent in October 2022.

“We recognise that as the economy slows, often young people are the first to feel the brunt of that,” he said. “That’s the motivation for our big agenda for skills. That’s why we’ve tried to get - whether it’s a minimum wage or wages in the care economy - growing again, because we want young people to have access to good, secure well-paid jobs.”

Reserve Bank governor ­Michele Bullock has warned that higher interest rates may be needed to cool increasingly “homegrown” inflation, although investors are now pricing in the view that the next move in rates will be cuts in the second half of next year.

The central bank has predicted unemployment would average 3.8 per cent over the final three months of the year.

JP Morgan economist Tom Kennedy said there was clear evidence in the latest statistics that demand for labour was cooling.

Mr Kennedy said the lift in unemployment – alongside a contraction in the New Zealand economy in the September quarter and signs the US Federal Reserve would begin easing rates sooner than expected – “will fuel speculation of rate cuts in 2024”.

“We still expect the RBA to be relatively unmoved by these developments, however, given the labour market turn is only modest and the journey back to the inflation target will take some time yet,” he said.

The workforce participation rate lifted by 0.2 percentage points to a new high of 67.2 per cent in November, with the boosted workforce swamping the month’s employment growth.

The ABS’s latest report also included a “major” upward revision to the civilian population from October, which meant the unemployment rate for that month was upgraded from the previous estimate of 3.7 per cent to 3.8 per cent.